UPDATE 2.30PM: Six councillors have stood united at the mosque site in East Bendigo, with many saying they refuse to get involved in a religious debate about Islam.

Cr Rod Campbell said many were forgetting the real issue - that the mosque would create a place of worship where people could meet in harmony.

There are just over 200 Muslims in Bendigo.

As it stands, the Islamic community have been congregating for worship in rooms at La Trobe University for several years but will soon have access to the two-storey, multi-use facility to pray.

When asked if the councillors were proud to approve the mosque, many of the supporting councillors agreed that it was "just business as usual" and no different to any other planning matter that came before council.

UPDATE 1PM: A Bendigo councillor has woken to a "strong symbol of hatred", after an anti-Islamic group last night hung black balloons on his house.

The anonymous group last week confirmed that the black balloon campaign was established by those who are "against the legislated inequality and abuse in our Western society of women and children".

Cr Weragoda, who is an Anglican of Sri Lankan background, says the attack seemed targeted because of his race.

"I moved here when I was 14 and never have I dealt with anything like this," he said.

"I feel threatened and I think it's because of my skin colour.

"It's definitely a strong symbol of hatred and it's the second time I have been targeted. Protesters also hurled abuse at me last night and played Middle Eastern music as I spoke."

Cr Weragoda has reported the matter to City of Greater Bendigo; the council is yet to comment.

There was dozens of other balloons hung around Bendigo last night.

More to come.

UPDATE 12.30PM: Plans to build a $3 million mosque in Bendigo are expected to face a legal challenge, with one councillor citing major concerns with the planning process and an anti-mosque group vowing to "keep fighting".

The mosque was approved by councillors in a six-two vote last night, with several members of the public gallery screaming, "Shame on you, shame" when the decision was passed down.

Councillor Elise Chapman, who voted against the proposal, said the meeting was so heated because there was no community consultation.

‘‘These people were not heard. They weren’t listened to,’’ she told Fairfax Media.

‘‘You’ve got 450 people whose lives, they say, are going to be turned upside down."

She believes the objectors have very good grounds to go to the Victorian Civil and Administrative Tribunal.

‘‘In a week’s time, I think there will be a lot more revealed,’’ she said.

Councillor Helen Leach, who also voted against the plan, said she wasn’t anti-Muslim but that it was her job to represent residents.

‘‘Maybe (the protesters) are looking at the sectarian problems in other capital cities in Australia and are concerned perhaps that may come to Bendigo,’’ she told radio station 3AW.

She said it’s unclear if those community concerns were well-founded and noted that a societal impact report wasn’t done.

‘‘If my residents are concerned, and I represent them, then I am concerned," she said.

UPDATE 10AM: The Stop the Bendigo Mosque group says the "battle has just begun" and has vowed to plot their next moves, after councillors approved the $3 million proposal last night.

More than 350 people - mostly vocal protesters - packed the City of Greater Bendigo council meeting and shared fears that the mosque would create a Muslim “enclave” in Bendigo.

The group has said it will take the matter to VCAT on its Facebook page, saying it lost this round but will keep fighting to stop the mosque.

"The mood was not defeat but of extreme buoyancy as residents broke off to go to the pub for a beer and plot next moves and there were plenty of suggestions as only country folk know how to niggle authorities," it said.

"From my perspective. VCAT, caveats, market stalls, fund-raising and going after AIM are all options that have others excited to do.

"For me it is time for a break. At least a couple of days...and some sleep would be good too.

"The Greater Bendigo council has tonight approved a planning application to build a Mosque in Rowena Street, East Bendigo.

"There are many conditions on the permit to make sure the impact on neighbours is acceptable.

"The city received more than 350 objections to the development and more than 40 submissions of support.

"Now a decision has been made, the applicants can move forward with the next stage in the development process."

WEDNESDAY: A LONE man stood up in the City of Greater Bendigo council meeting tonight and yelled "I support the mosque" amid fury from a vocal group of residents who claim the place of worship will incite terrorism upon Bendigo.

The $3 million proposal was approved by councillors in a seven-two vote, with several members of the public gallery screaming, "Shame on you, shame" when the decision was passed down.

Protesters packed the chamber for two hours of fierce debate over the Rowena Street proposal. One woman asked the councillors if they would be able to sleep at night if Islam “descended” on Bendigo; another asked what safe measures had been put in place to stop a terrorist attack.

The project, funded by the Australian Islamic Mission, attracted 254 objections and 40 submissions in support. Most of the objectors based their submissions on religious grounds, including fears the mosque would create a Muslim “enclave” and a drop in house prices.

Councillor support for the planning proposal was drowned out by anger and threats from the protesters, with one playing Middle Eastern music as Councillor Mark Weragoda spoke.

When asked to turn it off, the man said "Oh you don't like the sound of that" which received applause and laughter from the crowd.

Cr Weragoda, who has personally received threats from protesters, said he was angry so many people were "against multiculturalism", to which Cr Elise Chapman responded "I am disgraced by that (comment)".

"Look at my skin colour," Cr Weragoda said before he was drowned out by jeering.

"I know all about (multiculturalism)".

He went on to say that the mosque could be used for marriages and funerals, with a member of the gallery replying, "yeah, to young girls".

During the meeting Cr Chapman read a letter she had received from a protester, which stated that "jihadist groups kill people" and that Muslim families had more children than other people.

"The mosque will be run under Islamic regulations," she went on to say.

"It will compromise future (residential and industrial) options ... and mosques have been refused elsewhere."

Cr Helen Leach, who moved a motion to defer the decision for two months, said she had no doubt that the mosque would impact on residential amenity.

Council officers recommended councillors approve the proposal, concluding there was no reason not to grant the permit, subject to a number of conditions including a reduction in the minaret height.

“The weight of objections received is not of and in itself sufficient reason to refuse any planning application,” the officers wrote.

Some residents shared concerns about increased traffic and insufficient car parking, but Cr Lisa Ruffell said all places of worship had similar issues and were allowed.

When moving the motion, Cr James Williams said that freedom of belief was what made Australia such a valued place to live.

"We live in a tolerant country with laws made by our state and federal counterparts that deal with and spell out the separation of powers from government and religion," he said.

"We are a tolerant nation and we do not allow extreme actions and racist behaviour to go unpunished in our society."

Following the heated meeting, applicant Munshi Nawaz, who is a Muslim himself, encouraged freedom of speech and said it was "fine" that people had expressed such strong views.

However he acknowledged that there was a lot of misinformation surrounding the mosque and Islam itself.

"It was to be expected and I don't think the views heard tonight really represent how Bendigo feels about Islam as a religion," he said.

"I have lived in Bendigo for six years and am welcomed by the community."

He said if he had met the protesters in the street, it would have been a different story.

"I don't think they are against Muslims themselves, they just have a lot of misinformation about Islam and what it means. It doesn't mean terrorism.

"Their fears are not based in any truth."

Member for Bendigo East, Jacinta Allan, said the views of the “mob” did not represent the majority of the local community and some of the protesters did not live in Bendigo.

“I think the councillors who stared down intolerance and should be applauded,” she said.

“The general (view on the mosque) is that it’s just a planning matter that should be treated like any other planning matter.”

Federal member for Bendigo Lisa Chesters congratulated the local councillors for standing up for the majority of Bendigo people "who support multiculturalism and are excited to share the many cultures that make up Bendigo".